Police searched the Tokyo headquarters of Aozora Bank on Monday in connection with a window-dressing capital increase at confectionery maker Surugaya Co.
Osaka Prefectural Police have learned that Aozora extended a 1.2 billion yen loan to Tokyo investment company Iikura Holdings via an operator of Chinese restaurants affiliated with the firm on Dec. 12, before the firm provided 1.15 billion yen to Surugaya to ostensibly underwrite the new shares, investigative sources said.
Police suspect the bank might have extended the loan knowing the money would be used for a fake capital increase, because the affiliate paid back the loan to the bank in only three days.
Aozora spokesman Masaaki Harada maintained the bank has always conducted business in accordance with the law. The bank will make a formal statement on the case at an appropriate time, he added.
Police also searched Surugaya's main store in Wakayama.
On Saturday, they arrested five people -- three from Surugaya, including its president, Yoshiharu Okamoto, and two from the underwriter -- on suspicion of reporting the padded amount of capital by faking the capital increase.
Police suspect the confectionery company faked the capital increase to ensure its continued listing on the second section of the Tokyo Stock Exchange.
Surugaya's history dates back to 1461. Its business has been falling in recent years as consumers gradually move away from Japanese-style confectioneries.
The company posted a 740 million yen loss in fiscal 2003.